Study Suggesting Costs to Paid Sick Leave in Connecticut May have Bearing on Washington State Proposal


Attorney, Paradigm Counsel

"Everybody benefits.” That’s what proponents of Connecticut’s first-in-the-nation state paid sick leave law told legislators and the public during the debate that preceded the law’s passage. Business owners weren’t so sure—public hearings on the legislation contained testimony from a number of businesses concerned about the effects of the law on their operations.

The state’s sick leave law took effect at the beginning of 2012, and the point of this study is to capture businesses’ early experiences with and reactions to the law. Were the concerns expressed early on during the legislative debate worth considering, or was it just business owners “crying wolf ”?

Between April and October of 2012, we surveyed a broad list of business owners provided to us by the Connecticut Business and Industry Association and Connecticut Restaurant Association, and conducted in-depth follow up interviews with four of the responding businesses. The results should not be interpreted as being representative of the experience of all businesses in the state, but indicative of some of the challenges that businesses in a wide range of industries have faced while implementing the law.

Of the 156 businesses that responded to the survey, 86—or 55 percent—had started providing sick leave to comply with the new law. Prior to the law taking effect in January 2012, 31 of the businesses surveyed had scaled backed on employee benefits or reduced paid leave (or both) to account for the cost of the new law. Twelve had cut back employee hours, and another six reduced employee wages.

Nineteen businesses raised consumer prices, six laid off employees, and three converted part-time positions to full-time positions. Sixteen businesses indicated they had decided to limit or restrict their expansion within the state.

Perhaps more concerning were the future actions that state businesses were likely or highly likely to take in response to the law: Thirty-eight businesses said they would hire fewer people as a consequence. Other actions included offering fewer raises, scaling back on overtime, raising prices, and increasing the cost of other benefits like health insurance. Also surprising was the perception of the public health problem the law was intended to solve. Contrary to rhetoric used during the campaign, nearly 90 percent of all responding businesses indicated that sickness in the workplace was not a serious problem prior to the law taking effect; just 3 businesses described it as a serious problem.

Employers were also skeptical of the projected savings from the law. Of the employers in Connecticut that started providing sick leave, only two responded that it would reduce employee turnover, and another two anticipated that it would increase employee productivity.

Forty-six businesses worried that the law would increase unscheduled absences in their workplace. One of the companies surveyed already had experience with this phenomenon, where employees call out sick on Monday and make a “miraculous recovery” the following day. Perhaps most telling was that, of the 83 employers who responded to the question of whether the law was good for their business, 57 of them—or 69 percent—said it was not.

Even for businesses not affected by the law economically—like the utility company that participated in the follow-up survey—the law created a new liability, or “another thing employees can sue us over.”

During the follow-up interviews, business owners expressed frustration with the “employers vs. employees” narrative that was put forth during the debate. One restaurateur said his business “always took care of its people,” and that the lack of a paid policy was never an issue until labor unions decided to make it one. The owner of a daycare center was upset at the notion that he forced employees to choose between their jobs and their health: “Everybody’s happy—some of my employees have been here 20, 25 years. If things were so terrible, I wouldn’t have that kind of longevity.”

A full accounting of the law’s impact will take additional time, and this study makes no claim of being representative of the broader Connecticut business population. But it does suggest that the law has not been a cost-free endeavor, and that there have been consequences for both employers and employees as a result. Other cities and states considering similar laws should take these consequences under consideration.

Paying the Price for $15 an Hour

Paying the Price for $15 an Hour

With the economy soaring, it’s hard to gauge the effectiveness of Seattle’s minimum-wage hike. Some small-business owners remain dubious.
When the Seattle City Council passed the $15 minimum- wage ordinance in June 2014, David Lee, founder and CEO of the Field Roast Grain Meat Company, was not happy.
“The minimum wage hurts businesses like ours that compete on a national level,” says Lee, who believes it makes employers feel “cheap” and weakens “the goodwill that bound employers to employees.”
Even so, reflecting the mixed feelings of many Seattle businesses that want to do the right thing even as they struggle to survive, Lee decided to raise the minimum pay of his workers more than 20 percent — to $15 an hour — this fall, years before he was required to do so under the law.
“I wanted to get it behind me,” he explains.
Under a complex, multitiered system, Seattle companies with more than 500 employees must begin paying a $15-per-hour minimum wage starting in January. Companies with fewer than 501 employees  have until 2019, unless, like Lee, they provide health care or other benefits, in which case the $15 minimum wage rule applies to them beginning in 2021. Lee says his decision will cost Field Roast $300,000, about a quarter of its total earnings in 2015.
Ivar’s Seafood increased prices by 21 percent in 2015 to cover an increase in employees’ minimum wages to $15. The company didn’t have to start paying $15 an hour until next year, but Ivar’s President Bob Donegan believed it was the right thing to do. The decision helped resolve long-standing tension between lower-paid workers in the kitchen and wait staff who received much higher wages thanks to tips. Donegan says most patrons continue to tip even when they are told gratuities are now included in their bills.

A CASE OF COMPRESSION: Lynn Stacy unwraps grain meat for sausage products at Field Roast,
which has a flatter pay structure because of its higher minimum wage.

Some companies, however, remain concerned that the higher minimum wage could still hurt them. BrightStar Care, which offers home care and medical staffing in most states, is operating at a disadvantage because of the minimum wage, says CEO Shelly Sun. “Our Seattle franchise has only about 50 employees,” Sun notes, “but it’s being treated like a big business.”
Because Seattle treats the franchised operation of a national chain as if it were a large business, BrightStar will have to pay $15 an hour as of January, whereas some of its competitors with similar employee numbers in Seattle may not have to pay that much until 2019. Sun says a consequence may be reducing the size of the Seattle franchisee’s staff, which could have implications for clients.
Meanwhile, the national restaurant chain Buffalo Wild Wings says it is hesitant to expand in Seattle because the high minimum wage makes it economically inefficient to hire and train inexperienced workers. Still, what was once considered a movement isolated to “liberal” western cities like Seattle and San Francisco has gained sufficient momentum nationwide to be included in the national platform of the Democratic Party this election season. 
Thanks to Seattle’s strong labor market — the unemployment rate in the Seattle metropolitan area was 4.4 percent in July (compared to 5.8 percent statewide) — the higher wages have had little negative effect on the economy.
A report released in July by the University of Washington’s Evans School of Public Policy and Governance concluded that the new minimum wage law hasn’t had a lot of upside, either. Since a strong labor market would have increased wages in any case, the study concluded, only a quarter of the recent gains could actually be attributed to the minimum-wage law — a little more than a few dollars a week. 

Revisiting the minimum-wage story | Seattle Business magazine examined the minimum-wage issue in its May 2014 issue, just as the Seattle City Council was considering an ordinance raising the minimum hourly rate to $15 in a gradual process over several years, depending on a company’s size. This is the magazine’s first follow-up since passage of the minimum-wage law.